Net Energy Metering 3.0 Explained for San Diego Businesses

What Is Net Energy Metering (NEM)?

Net Energy Metering is the billing arrangement between a solar customer and their utility (SDG&E for most San Diego businesses) that determines how excess solar energy you send to the grid is credited on your bill. When your solar panels produce more electricity than your building uses in real time, that surplus flows to the grid. NEM defines how much you get paid, or credited, for that surplus.

Under the original NEM programs, you received a credit roughly equal to the retail rate you'd otherwise pay; meaning exporting solar was almost as valuable as not importing electricity. NEM 3.0 changed this dramatically.

NEM 2.0 vs. NEM 3.0: A Side-by-Side Comparison

How NEM 3.0 Export Rates Actually Work

Under NEM 3.0, SDG&E pays you based on the ‘Avoided Cost Calculator' (ACC) rate, a CPUC-developed formula that estimates the value of solar generation at each hour of the day. The key insight: the ACC rate is not flat.

• Midday (10am–3pm): Export rates are very low — often $0.03–$0.06/kWh. This is when most commercial solar systems produce their peak output.
• Evening peak (4pm–9pm): Export rates jump significantly, sometimes reaching $0.25–$0.40/kWh on weekday evenings. This is where the real export value lives under NEM 3.0.
• Off-peak overnight: Rates are minimal, often under $0.03/kWh.

The implication is profound: exporting solar power when your panels are generating the most (midday) earns you almost nothing under NEM 3.0. But if you can store that midday generation in a battery and export or use it during the evening peak, you capture maximum value.

This is why every Indigo Energy NEM 3.0 proposal for San Diego businesses includes a battery storage analysis; not as an upsell, but because the math genuinely changes the economics.

NEM 3.0 Rates by Time of Use: SDG&E Commercial Schedules

What NEM 3.0 Means for Your Commercial Solar Payback

For a business that operates primarily during daytime hours (retail, office, manufacturing), solar generation naturally aligns with on-site consumption. These businesses fare relatively well under NEM 3.0 because they self-consume most of their solar production rather than exporting it.

However, businesses that have low daytime electricity demand, or that shut down on weekends, will have significant export during peak production hours. For these customers, NEM 3.0 without storage produces substantially worse economics than NEM 2.0.

Battery Storage: The NEM 3.0 Game-Changer

Under NEM 3.0, a properly sized and dispatched battery energy storage system (BESS) can recover much of the value lost from reduced export rates. Here is how the economics work:

• Your solar panels charge the battery during low-value midday hours (when you'd otherwise export at $0.04–$0.06/kWh).
• The battery discharges during the evening peak (4pm–9pm), either powering your building at retail TOU rates ($0.42–$0.55/kWh) or exporting at NEM 3.0's highest rates ($0.20–$0.40/kWh).
• The battery can also provide demand charge reduction by limiting peak demand measured by SDG&E — often saving $10–$25 per kW of demand avoided.

For a 100 kW commercial system paired with a 200 kWh battery, Indigo Energy modeling for San Diego shows BESS can add $8,000–$18,000 in additional annual value versus solar alone under NEM 3.0.

SGIP rebates currently cover $50,000–$200,000+ of battery storage costs for qualifying San Diego businesses. This dramatically improves the BESS business case. Apply early, SGIP funds are allocated on a first-come, first-served basis.

NEM 3.0 Interconnection: What to Expect with SDG&E

SDG&E's NEM 3.0 interconnection process follows the same general CPUC framework as NEM 2.0 but with updated application requirements. Key steps for commercial applicants:

Indigo Energy manages the entire SDG&E interconnection process on behalf of our clients, including all documentation, engineering calculations, and utility communications.

Is It Too Late to Get NEM 2.0?

Yes, for new applicants. NEM 2.0 closed to new applications for most customers in April 2023. However, NEM 2.0 customers who received approval before the cutoff are grandfathered at NEM 2.0 rates through April 2043.

If you're evaluating solar now, NEM 3.0 is your tariff. The good news: with proper system design and battery storage, the economics of NEM 3.0 can be very strong in San Diego given SDG&E's rates.